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Leadership , Talk Story , Tourism – January 2, 2019

Talk Story: Peter Ingram, President & CEO of Hawaiian Airlines

Photo: David Croxford

After years of robust success, Hawaii’s largest airline faces increased competition and other market pressures.

But Ingram remains unfazed and says he is focusing instead on improving the company’s strengths: outstanding operations, a favorable cost structure and its unique Hawaiian hospitality.

 

Q: Southwest Airlines is launching Mainland-to-Hawaii operations in early 2019. What impact will this have on Hawaiian Airlines?

A: Competition is part of our business. Today we compete with American, Delta and United, the three largest airlines in the world. We compete with Alaska Airlines, which is very strong. We compete with some great international airlines like Qantas Airways and Air New Zealand. Hawaiian Airlines can compete with any airline in the world and we’ve proven that. So I’m more focused on Hawaiian Airlines and what we can do to be better, rather than directing our focus to one single competitor.

 

Q: What specific areas will you focus on?

A: From a big-picture perspective, there are broad elements that don’t change, starting with our authentic Hawaiian hospitality, which is a great differentiator. We’ll also continue running a world-class airline, which means getting operations right: being on time, delivering bags to the correct airplane, etc.

We’ve been prosperous and stable over the last few years, which has allowed us to invest in the business and improve our balance sheet, and we’re going to continue doing that, too.

Finally, we have our mantra of one ohana, which is less about what we do, and more about how we do. If you want our front-line employees to take care of our guests with empathy and true hospitality, then they have to receive that from us as well. Those things don’t change.

But as we think about being better, there are a couple of themes going into next year. One is making travel effortless, which is an aspirational goal because there’s a lot of complexities in travel.

There’s a real opportunity to improve our guest experience at the airport. Our employees are doing the best job with the resources they have, but if you look at our Honolulu lobby during peak hours, we’re clearly trying to fit way too much activity in a small piece of real estate. We are working on this and just this week, we have taken over some extra check space, which is helpful.

Over the next few weeks, we’re going to be moving our international departures into a new area to create a better environment. We’re going to make some investment into our facilities, counters and check-in areas. And we’re working on the software and hardware around our kiosks to make sure that experience is more fluid.

In addition, we are examining our boarding process for ways to improve it. We’ve got a new mobile app, which is in beta testing right now and we expect to roll that out soon.

 

Q: What is the strategic significance of expanding your partnership with JetBlue to give you access to the Boston market in April 2019?

A: JetBlue is the leading carrier in number of seats available in the Boston area. There are a lot of other destinations in the Northeast and in the Midwest that they serve, but which are not big enough for us to enter. With JetBlue, we can offer convenient connections in that area, which could bring in more passengers for us. The margin of profitability in the airline industry is very thin, so if we can get a plane from being 80 percent full to being 90 percent full, that can be powerful. The relationship helps us achieve this in a cost-effective way, like it did when we entered the New York market.

 

Q: You don’t operate any flights solely within the Mainland – only direct flights between the Mainland and Hawaii. Will you expand to flights between Mainland cities?

A: Our biggest opportunity right now is expanding within our existing footprint. Have we looked at that? Absolutely. It’s not on the priority list for 2019.

 

Q: In late 2019, you plan to start offering main cabin basic seats, which will be cheaper but allow no ticket changes, seats are assigned after check-in and these passengers will board last. What does this do to the “premium brand” status that you worked hard to establish?

A: Regardless of what product a guest buys, our authentic Hawaiian hospitality is always included. Main cabin basic is an extension of the things we’ve been doing over the last few years.

Today, we offer three products: our premium cabin, which offers full-flat seats; our extra comfort product, which offers 5 extra inches of legroom; and our main cabin product. Our guests will make different choices, depending on what they value.

Someone like me who is 6-foot-4 inches but frugal may say: “I don’t want to pay for the premium cabin experience (though I love it), but, I really value that legroom so I’m willing to pay a premium to get that extra comfort product.”

We want to make sure we’ve got a product for everyone. So if some passengers don’t value flexibility and don’t mind being the last group to board – as long as they know they’re going to get on the airplane and they’re going to get authentic hospitality – then we want to offer a choice for them.

 

Q: It was a point of pride that you hadn’t increased baggage fees since 2012. But that changed in 2018, when the cost went up by $5 for first and second bags (now $30 and $40, respectively, for Mainland flights). Why the change?

A: Baggage fees are a sensitive topic because people remember the days when the first and second bag was bundled into the overall price of a ticket.

You could argue that prior to 2007 or 2008, when we first started charging domestically for first and second bags, that the people who just had a carry-on bag were subsidizing the costs of providing baggage for the people who were maximizing its use. Now we’re saying if you use it and you value it, great. But if you don’t value it, you don’t get charged.

 

Q: You’ll be opening an IT facility with approximately 100 employees in Arizona. Why go outside of Hawaii?

A: We’re not shifting the level of employment or the level of activity out of Honolulu. IT is an area where it’s been a struggle for us to find enough talent, since Hawaii has a small population. We end up hiring IT professionals through third-party contractors.

The biggest advantage of setting up a facility in Phoenix is that we’re going to complement what we have in Honolulu. By having a site in another location with Hawaiian Airlines employees, we’re going to access some markets for IT capabilities that aren’t available to us today. We will also reduce our reliance on third-party providers to meet our IT needs.

 

Q: Scoot has announced it will stop services from Singapore and Osaka to Hawaii, indicating weak demand. Is Hawaii a particularly tricky market?

A: I think it’s a very competitive business overall. Before Scoot entered the market, Hawaiian and three other carriers were competing in Osaka. So it’s a matter of the supply and demand being in balance. And sometimes you end up with a little bit too much capacity. Then the market has to sort its way through that over time.

 

Q: The slow pace of Honolulu airport’s modernization project has frustrated Hawaiian because it hampers operations. How is that coming?

A: We’re excited that we moved into our new facility, though it was four years later than projected. We hope that everyone has learned the lessons from the last project so we don’t repeat the mistakes and keep modernization on track.

From our standpoint, we’re not responsible for the delivery of the modernization, but we have a huge stake in the outcome. It is an incredibly important project. More gates at the airport will allow us to service the public better.

So we’re working very closely to make sure we’re monitoring and understanding how things are moving along and seeing if there are any early warning signs of trouble. Right now, all seems fine.

 

Q: December started as a rough month for Hawaiian, with a reduction of initial projections on operation revenue per seat and the loss of $400 million in stock capitalization. What message did you convey to the investors in New York?

A: Communicating with our investors and having a good story to tell is important because we have a capital-intensive business and need access to capital markets for our long-term success.

I don’t want us so focused on one quarter’s results that we lose sight of the big picture. We’ve got a good cost structure and we deliver great hospitality to our guests at low enough prices that they find appealing. And if we continue to do all of these things better than our competitors, we will continue to be successful.

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